Sports Cards Inc. manufactures baseball cards sold in packs of 10 in drugstores and grocery stores...

 

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Sports Cards Inc. manufactures baseball cards sold in packs of 10 in drugstores and grocery stores throughout the country. It is the second leading firm in an industry with four major firms. SportsCards has been approached by Zip Cereal Inc., which would like to order a special edition of cards to use as a promotion with its new cereal. Sports Cards would be solely responsible for designing and producing the cards. Zip wants to order 30,000 sets and has offered $25,500 for the total order. Each set will consist of 30 cards. Sports Cards currently produces cards in sheets of 120. SportsCards would incur no marketing costs for the special order. It has the capacity to accept this order without interrupting regular production. Production, marketing and other costs (per sheet): $ Direct materials 1.30 Direct labor $ 0.25 Variable overhead $ 0.45 Fixed overhead $ 0.20 Variable marketing $ 0.05 Fixed marketing $ 0.35 Insurance, taxes and administrative salaries Additional cost for the special order: Design Other setup costs $ 0.10 $ 2,500 $ 5,000 Required: 1) Based solely on a short-term financial analysis, should Sports Cards accept the special order? Why or why not? Support your answer with appropriate calculations. 2) What are the important strategic issues in this decision for SportsCards? 3) What strategic factors/considerations are generally relevant to the special-order decision problem (i.e., whether a company should accept a one-time order from a customer with whom the company does not generally do business)? Sports Cards Inc. manufactures baseball cards sold in packs of 10 in drugstores and grocery stores throughout the country. It is the second leading firm in an industry with four major firms. SportsCards has been approached by Zip Cereal Inc., which would like to order a special edition of cards to use as a promotion with its new cereal. Sports Cards would be solely responsible for designing and producing the cards. Zip wants to order 30,000 sets and has offered $25,500 for the total order. Each set will consist of 30 cards. Sports Cards currently produces cards in sheets of 120. SportsCards would incur no marketing costs for the special order. It has the capacity to accept this order without interrupting regular production. Production, marketing and other costs (per sheet): $ Direct materials 1.30 Direct labor $ 0.25 Variable overhead $ 0.45 Fixed overhead $ 0.20 Variable marketing $ 0.05 Fixed marketing $ 0.35 Insurance, taxes and administrative salaries Additional cost for the special order: Design Other setup costs $ 0.10 $ 2,500 $ 5,000 Required: 1) Based solely on a short-term financial analysis, should Sports Cards accept the special order? Why or why not? Support your answer with appropriate calculations. 2) What are the important strategic issues in this decision for SportsCards? 3) What strategic factors/considerations are generally relevant to the special-order decision problem (i.e., whether a company should accept a one-time order from a customer with whom the company does not generally do business)?